Earnings call transcript: NBT Bancorp Q2 2025 misses EPS forecast, stock rises

NBT Bancorp (NBTB) reported its second-quarter 2025 earnings, revealing a significant miss on earnings per share (EPS) expectations but a slight beat on revenue forecasts. Despite the EPS miss, the stock rose by 2.36% in premarket trading. The company reported an EPS of $0.44 compared to the forecasted $0.83, marking a surprise of -46.99%. Revenue stood at $171 million, slightly above the anticipated $170.89 million. According to InvestingPro analysis, NBTB is currently trading below its Fair Value, suggesting potential upside opportunity. For more undervalued stocks, visit our Most Undervalued Stocks list.

Key Takeaways

• EPS fell short of expectations by 46.99%, impacting initial investor sentiment.
• Revenue surpassed forecasts by a marginal 0.06%.
• The stock price increased by 2.36% in premarket trading, closing at $41.47.
• NBT Bancorp completed a merger with Evans Bancorp, adding significant assets and accounts.
• The company continues to invest in digital banking solutions.

Company Performance

NBT Bancorp reported robust revenue growth of 22% year-over-year and 10.5% quarter-over-quarter, driven by its recent merger with Evans Bancorp. The merger added over 100,000 accounts and 25,000 digital banking users, strengthening NBT’s market position in New York and Pennsylvania. The company’s diversified loan portfolio, with a balance of commercial and consumer loans, positions it well against potential interest rate changes. InvestingPro data reveals the company has maintained dividend payments for 40 consecutive years and raised dividends for 12 straight years, demonstrating strong financial stability. The current dividend yield stands at 3.28%, with a P/E ratio of 13.94x.

Financial Highlights

• Revenue: $171 million, up 22% year-over-year
• Earnings per share: $0.44, down from expectations
• Operating earnings per share: $0.88, up $0.08 from the prior quarter
• Net income: $22.5 million
• Return on equity: 10.5%
• Tangible book value per share: $24.57, up 9% year-over-year

Earnings vs. Forecast

NBT Bancorp’s actual EPS of $0.44 fell short of the forecasted $0.83, resulting in a negative surprise of 46.99%. This miss is significant compared to previous quarters, where the company typically met or slightly exceeded expectations. Revenue, however, slightly exceeded projections, indicating strong operational performance despite the earnings miss.

Market Reaction

Despite the EPS miss, NBT Bancorp’s stock rose by 2.36% in premarket trading, reflecting investor confidence in the company’s long-term growth potential. The stock closed at $41.47, within its 52-week range of $37.31 to $52.44. This positive movement suggests that investors may be focusing on the company’s strategic initiatives and merger synergies rather than the current quarter’s earnings shortfall.

Outlook & Guidance

Looking forward, NBT Bancorp expects modest loan growth in the second half of 2025 and a slight improvement in net interest margin. The company remains focused on organic growth and potential mergers and acquisitions. Future EPS forecasts for the next quarters range from $1.04 to $1.14, with revenue projections showing steady growth. InvestingPro reports that two analysts have revised their earnings upward for the upcoming period, with analyst price targets ranging from $47 to $53. Subscribers can access the comprehensive Pro Research Report, part of our coverage of 1,400+ US equities, for detailed analysis and actionable insights.

Executive Commentary

CEO Scott Kingsley emphasized the company’s focus on integration post-merger, stating, "We are completely focused from an integration standpoint." Bank President Joe Stagliano noted the positive reception from customers and communities, saying, "The response from our customers and communities has been overwhelmingly positive."

Risks and Challenges

• Potential impact of interest rate changes on loan demand.
• Integration challenges following the Evans Bancorp merger.
• Competitive pressures in the indirect auto and commercial lending spaces.
• Uncertainty surrounding macroeconomic conditions and regulatory changes.

Q&A

During the earnings call, analysts inquired about the potential impact of a 25 basis point rate cut, the company’s liquidity strategy post-merger, and ongoing developments with the CHIPS Act and Micron. Executives addressed these concerns, highlighting their strategic focus and market positioning.

Full transcript - NBT Bancorp Inc (NBTB) Q2 2025:

Conference Moderator, NBT Bancorp: Day, everyone. Welcome to the conference call covering NBT Bank Corp. Second Quarter twenty twenty five Financial Results. This call is being recorded and has been made accessible to the public in accordance with SEC Regulation FD. Corresponding presentation slides can be found on the company’s website at nbtbancorp.com.

Before the call begins, NBT’s management would like to remind listeners that, as noted on Slide two, today’s presentation may contain forward looking statements as defined by the Securities and Exchange Commission. Actual results may differ from those projected. In addition, certain non GAAP measures will be discussed. Reconciliations for these numbers can be contained within the appendix of today’s presentation. At this time, all participants are in a listen only mode.

Later, we will conduct a question and answer session. Instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the call over to NBT Bancorp President and CEO, Scott Kingsley, for his opening remarks. Mr.

Kingsley, please begin.

Scott Kingsley, President and CEO, NBT Bancorp: Good morning. Thank you for joining us for this earnings call covering NBT Bancorp’s second quarter twenty twenty five results. I would like to extend a special welcome today to our newest investors who joined us in May with the Evans Bancorp merger. With me today are Annette Burns, MBT’s Chief Financial Officer Joe Stagliano, President of MBT Bank and Joe Ondesco, our Treasurer. Our operating performance for the second quarter reflected the positive attributes of productive asset repricing trends, the diversification of our revenue streams, prudent balance sheet growth and the additive impact of our recently completed merger with Evans Bancorp.

Operating return on assets was 1.19% for the second quarter with a return on equity of 10.5% and ROTCE of 15.25%. Each metric demonstrates continued improvement over the linked and prior year quarters and importantly reflects the generation of positive operating leverage. Our tangible book value per share of $24.57 at June 30 is 9% higher than a year ago and our tangible equity ratio is already back above the level it was when we announced the Evans merger ten months ago. This continued capital strength has us very well positioned to support all of our strategic growth initiatives. The continued remix of earning assets and diligent management of funding costs combined with the addition of the Evans balance sheet resulted in an improvement in net interest margin for the fifth consecutive quarter.

Growth in non interest income continues to be a highlight with each of our non banking businesses achieving productive improvements in both revenue and earnings generation year over year. We were also pleased to announce an 8.8% improvement to our dividend to shareholders, marking our thirteenth consecutive year of increases. This reflects our strong capital position and our generation of consistent and improving operating earnings. We continue to see activity across Upstate New York semiconductor chip corridor, including progress on-site specific milestones related to Micron’s planned complex outside of Syracuse as well as the enhanced partnership announced between Micron and the federal government that notably included additions to Micron’s previous capital commitments. Team members at NBT are engaged in supporting our customers and communities and participating in the growing ecosystem around semiconductors and advanced electronics manufacturing in several of our markets.

Before turning the meeting over to Annette to review our second quarter results with you in detail, Joe Stagliano will provide some additional commentary around the completion of the Evans merger. Joe? Thank you, Scott. We closed our merger with Evans Bancorp on Friday, May 2, and successfully converted all Evans customer accounts

Joe Stagliano, President of NBT Bank, NBT Bancorp: to the NBT core operating systems over the weekend. The following Monday, we opened 18 Evans Bank branches as NBT Bank locations, including 14 in and around Buffalo and four in Greater Rochester. We believe the approach of closing and simultaneously completing the systems conversion enhances both the employee and customer experience, it reduces execution risk and it expedites the integration process. Through this transaction, we added approximately $1,700,000,000 of loans, dollars 1,900,000,000.0 of deposits and issued 5,100,000.0 additional shares as consideration, valued at $222,000,000 as of the closing date. So far, we have realized the vast majority of our targeted 25% in cost synergies with the remainder expected by the 2025.

We achieved a smooth transition made possible by our dedicated integration team with over 100 members from both organizations. They worked tirelessly with the shared vision of delivering a positive experience to over 40,000 Evans Bank customers. As a result of the conversion, we added more than 100,000 accounts and over 25,000 digital banking and debit card users. We also welcomed 200 Evans employees to the MDT team and three seasoned executives from Evans assumed leadership positions with NBT Bank. Ken Pollack as President of the Western Region Of New York and Buffalo Regional President, Tim Brown as Rochester Regional President and Audrey Myers as Senior Territory Manager for Retail Banking in the Buffalo and Rochester markets.

I personally want to thank everyone who joined NBT for their professionalism, their enthusiasm and their partnership. The response from our customers and communities has been overwhelmingly positive. They have embraced our enhanced suite of products and technology offerings, and they’ve shared their appreciation for the care and attention we’ve shown throughout this process. In the days and weeks following the merger, members of our leadership team had visited branches and met with customers and employees. The reception has been warm and the conversation is encouraging.

We are continuing to work together toward a common goal: to serve our customers better, support our communities more deeply, provide enhanced shareholder value and grow stronger together. Now I will turn it over to Annette to review our second quarter results with you in detail. Annette?

Annette Burns, Chief Financial Officer, NBT Bancorp: Thank you, Joe, and good morning. Turning to the results overview page of our earnings presentation. In the second quarter, we reported net income of $22,500,000 or $0.44 per diluted common share. Excluding acquisition expenses, acquisition related provision for credit losses and securities gains, our operating earnings per share were $0.88 an increase of $08 per share compared to the prior quarter. Revenues grew approximately 10.5% from the prior quarter and 22% from the second quarter of the prior year, driven by improvements in net interest income, including the impact of the Evans merger.

The next page shows trends in outstanding loans. As Joe mentioned, we added $1,700,000,000 of loans from Evans and recorded fair value marks on loans totaling $95,200,000 net of a $7,700,000 reclassification to loan loss reserves for purchased credit deteriorated loans. Excluding consumer loans and a planned contractual runoff status and the loans acquired from Evans, loans grew nearly 1% from December 2024. Growth in commercial and industrial, indirect auto, home equity were partly offset by decreases in residential mortgage and commercial real estate, which experienced higher level of payoffs during the quarter. Our total loan portfolio of nearly $12,000,000,000 remains very well diversified and is comprised of 56 commercial relationships and 44% consumer loans.

I should also mention that we completed the sale of the $255,000,000 Evans Securities portfolio in May, which contributed to the increase in short term interest bearing accounts at the end of the second quarter and leaves us some near term liquidity optionality. On Page seven, total deposits of $13,500,000,000 were up almost $2,000,000,000 from December 2024. Excluding the deposits acquired from Evans, deposits increased $104,000,000 from the 2024. Deposit mix characteristics also improved with an increase in demand deposits, savings, interest bearing checking and money market accounts offset by a decrease in time deposits. 59% of our deposit portfolio consists of no and low cost checking and savings accounts, while 41% is held in higher cost time and money market accounts.

The next slide highlights the detailed changes in our net interest income and margin. Our net interest margin in the second quarter increased 15 basis points to 3.59% from the prior quarter, primarily driven by the increase in earning asset yields and acquisition related net accretion. Net interest income for the second quarter was $124,200,000 an increase of $17,000,000 above the prior quarter and $27,000,000 above the 2024. The increase in net interest income from the prior quarter was primarily driven by the Evans acquisition as well as higher earning asset yields, partially offset by a two basis point increase in the cost of deposits. Evans’ higher cost of deposits, primarily in interest bearing checking and savings accounts, was partly offset by a decrease in the cost of time deposits.

The trends in noninterest income are outlined on page nine. Excluding securities gains, our fee income was $46,800,000 an expected seasonal decrease of 1.5% compared to the previous quarter and increased 8% from the 2024. The decrease from the prior quarter was primarily attributable to the first quarter’s $1,200,000 bank owned life insurance gain and lower seasonal insurance revenues, partially offset by incremental Evans activity. Non interest income represented 27% of total revenues in the second quarter, reflecting the strength of our diversified revenue base, but down from 31% in the prior quarter, reflective of the Evans mix. Total operating expenses, excluding acquisition expenses, were $105,400,000 for the quarter, a 6.3 increase from the prior quarter.

Salaries and employee benefit costs were $64,200,000 an increase of $3,500,000 from the prior quarter. This increase was primarily driven by the impact of the Evans acquisition, a full quarter of merit pay increases, and higher medical costs. These increases were partially offset by lower payroll taxes and stock based compensation expenses, which are historically higher in the first quarter of each year. The quarter over quarter increase in technology and data services, occupancy and all other expenses were driven primarily by the Evans acquisition as well as timing of planned initiatives and continued investment in digital platform solutions. Amortization of intangible assets included $1,000,000 related to Evans in the second quarter.

We recorded a $33,200,000 core deposit intangible related to the Evans core funding base. We are expecting to amortize that intangible over the next ten years on an accelerated basis. Slide 11 provides an overview of key asset quality metrics. Provision expense for the three months ended 06/30/2025, was $17,800,000 compared to $7,600,000 for the 2025. The increase in the provision for loan losses during the quarter was due to $13,000,000 of acquisition related provision for loan losses and a modest deterioration in the economic forecast, partially offset by a decrease in net charge offs from the prior quarter.

Reserve coverage was 1.21% of total loans and covered three times the level of nonperforming loans. The increase in the allowance for loan losses in the 2025 included $21,000,000 of allowance for acquired Evans loans. In closing, the successful completion of the Evans merger was a significant milestone for the quarter and the impact on our financial position is aligned with our expectations. Continued growth in both net interest income and fee based income drove the generation of the sequential and year over year positive operating leverage and contributed to our solid operating performance in the 2025. Thank you for your continued support.

At this time, we’ll continue we will welcome any questions you may have.

Conference Moderator, NBT Bancorp: Certainly. Our first question comes from the line of Mark Fitzgibbon from Piper Sandler. Your question please.

Mark Fitzgibbon, Analyst, Piper Sandler: Hey guys, good morning.

Joe Stagliano, President of NBT Bank, NBT Bancorp: Hey, good morning, Mark.

Mark Fitzgibbon, Analyst, Piper Sandler: Hey, Mark. Question I had, maybe Annette, what does a 25 basis point rate cut mean for your margin, assuming the short end comes down and the rest of the curve holds? Sure.

Annette Burns, Chief Financial Officer, NBT Bancorp: Happy to answer that, Mark. The impact of rate cuts on our balance sheet, we’re fairly neutrally positioned. So we have about $2,500,000,000 in loans that almost reprice immediately with a downward change in rates. And then on the funding side, we have about 40% of our deposit base, somewhere around $5,500,000,000 that we can actively reprice downward as well. There might be a little bit of lag because that takes some active management on our part, but we feel like that’s not going to have a significant impact on us because we’re so neutrally positioned, but there might be a little bit of lag on the funding side.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay. And then as you look at like the third quarter with all the moving parts with Evans and sort of the purchase accounting impact, how are you thinking about the net interest margin for, say, 3Q, assuming no Fed rate cuts?

Annette Burns, Chief Financial Officer, NBT Bancorp: Okay. There was a lot of noise in the second quarter. When we think about net interest margin going forward, we know that there is one additional month of accretion related to Evans to have a full quarter impact, and that’s somewhere between 1,000,000 and $1,500,000 So that will have a couple of basis points improvement on our net interest margin. And then just thinking about the rest of our book, we’ll probably continue to see a few basis points improvement as it relates to our earning asset yields repricing. That’s probably going to get a little bit more less impactful over time as our book continues to fully reprice.

For example, our indirect auto book is already fully repriced, but there’s a little bit more room in the C and I and resi mortgage book, but that happens a little bit slower. And we think our funding costs are pretty well stabilized. We might get a few basis points, but certainly not the same level of impact that we experienced the last two quarters.

Scott Kingsley, President and CEO, NBT Bancorp: And Mark, is Scott. Thanks for the question. I think we both know at some point in an improving NIM cycle, it’s likely that some of that benefit from a repricing standpoint gets competed away. So we’re not going be immune to that either.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay, great. And then when deals are announced, nobody really wants to talk or give credit for sort of potential revenue synergies. But now that the Evans deal is complete, I wonder if you could help us think about the size of the opportunity, particularly on wealth management insurance going forward.

Scott Kingsley, President and CEO, NBT Bancorp: So great question and thanks for asking that one. For us, Evans had a very, very modest participation in wealth management. Like us, they had a handful of advisors that are on the LPL platform. So great opportunity for us not only to expand the base of advisors in Western New York, but to have the synergistic outcomes of bringing them into a larger established program like ours. It’s kind of a similar thought on the insurance side.

Evans had an insurance business several years ago and sold that business before we got together with them transactionally. With that in mind, a lot of customers that can utilize our services on a more broad basis on the insurance side. Probably takes a little bit longer to get going because those tend to be in annual renewal cycles. But opportunistically, we think we’ll grow in both attributes.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay, great. And then from a credit perspective, any types of lending that give you concern or areas where maybe you’re easing off the throttle a little bit? Any particular types of particular on the commercial side?

Scott Kingsley, President and CEO, NBT Bancorp: I can frame it this way. From an asset quality standpoint, really nothing. From a holistic desire to have more banking relationships on both the C and I front or the owner occupied CRE front, where the opportunity presents itself to be able to deliver multiple services as opposed to just the loan, we do have a focus there. It does not mean that we aren’t interested in commercial real estate transactions across our geography. The sheer size of our geography makes natural diversification inherent for us anyways.

But I’m kind of framing, Mark, that we’re spending more time focusing on those relationships where we can provide multiple services as opposed to just close a transaction on the commercial real estate side.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay, and then last one is non interest expenses. Can you help us think about sort of what a good run rate might be for the third quarter?

Annette Burns, Chief Financial Officer, NBT Bancorp: Sure, so excluding merger costs and expenses, I think we came in somewhere around $105,000,000 for the quarter. Evans probably adds somewhere in the 11,000,000 to $12,000,000 a quarter. So there’s probably a little bit of seasonality quarter over quarter with the fourth quarter probably being a little bit heavier. But I think if you think of one additional month of Evans added to the third quarter’s run rate, that’s probably a good place to be.

Mark Fitzgibbon, Analyst, Piper Sandler: Great. Thank you.

Steve Moss, Analyst, Raymond James: Appreciate it, Barb.

Conference Moderator, NBT Bancorp: Thank you. And our next question comes from the line of Steve Moss from Raymond James. Your question, please.

Steve Moss, Analyst, Raymond James: Good morning.

Annette Burns, Chief Financial Officer, NBT Bancorp: Good morning, Steve.

Scott Kingsley, President and CEO, NBT Bancorp: Good morning, Steve. Congratulations on the Family Edition.

Steve, Analyst, Raymond James: Hi, Scott. Just wanted to ask here in terms of outlook for you guys. With regard to the loan pipeline, just kind of curious how your sense of business activity is there and what you guys are thinking about the second half?

Scott Kingsley, President and CEO, NBT Bancorp: Yes. Thanks for that. Tee up for that one. So the pipeline is very good. We’re actually at the highest level in pipeline that we’ve ever experienced.

Now a portion of that obviously came with the addition of Evans. But what have we noticed in the second quarter or late in the first quarter into the second quarter that speed to completion has experienced hesitation. So one of my favorite quotes now is, Uncertainty does not inspire action. And we saw that during the second quarter. It doesn’t mean that our customers are not interested in the initiatives that they had planned to do.

They’ve just taken a little bit of a pause and rethought where does that position them not only in the 2025, but longer term. Generally, see people who had projects in place from a capital expansion or a capacity adding are moving forward with most of them. We’ve heard of a couple that decided to slow down because the machine they’re ordering from Germany suddenly became 28% more expensive. But that’s more episodic than systematic. But what we have seen is that people are having some hesitation about adding people because they don’t want to be in a position where they have to hire now and send some people home in and around the end of the year.

So generally, feel pretty strong about where we are from the activities on the pipeline side, But probably we’ll not experience a real meaningful change in the growth rate that we had in the first half of the year and the second half of the year.

Steve, Analyst, Raymond James: Okay. Got you. And then in terms of loan pricing, you mentioned the ability to reprice the benefit from master repricing or lower prices moderating. Where are you seeing more competition these days?

Scott Kingsley, President and CEO, NBT Bancorp: So I’ll start with that and if Joe and Ann have comments, you’re welcome to chime in on this. But competitively kind of across the board. Certainly, we saw competition in the second quarter in the indirect auto space. And quite frankly, we were participating and growing still in the second quarter. But by the time we reached the end of the quarter, competition had changed pricing to the point where we’re probably just trying to replace cash flows in that portfolio.

And why is that? As you remember, the inversion in the belly of the curve actually got worse in the quarter. So for competitive standpoint, creates an issue for us relative to pricing. We are holding the line relative to spread dynamics. And as I mentioned before, we’re really focused on supporting those customers and those activities that allow us to gain some funding and some deposit growth and at the same time build out our holistic delivery.

Steve, Analyst, Raymond James: Okay. And maybe on the commercial side, are you just seeing more competition these days from the larger guys coming back into the market? Just kind of curious dynamics there.

Scott Kingsley, President and CEO, NBT Bancorp: Yeah, not much the larger firms backing into where we are. Some of the smaller people we compete with, everyone’s best customer has a different definition. So in certain of our markets, we’re seeing a little bit more defending from the smaller banks. But I won’t say that the competition has generally changed radically. And I don’t think the discipline in pricing from most of the competition has really changed dramatically either.

Steve, Analyst, Raymond James: Okay, great. Well, I appreciate all the color here. I’ll step back. Thank you.

Joe Stagliano, President of NBT Bank, NBT Bancorp: Appreciate it.

Conference Moderator, NBT Bancorp: Thank you. And our next question comes from the line of Matthew Breese from Stephens Inc. Your question please.

Steve Moss, Analyst, Raymond James: Hey, good morning. Good Good morning.

Steve, Analyst, Raymond James: I was hoping we could touch

Steve Moss, Analyst, Raymond James: on liquidity. Annette, you had talked a little bit about that in your comments. Just curious what the plans are there in terms of deployment over what timeframe and into what? And then along with that, the last couple of years, the third quarter has been kind of a high watermark for cash and just curious how that plays out this year.

Scott Kingsley, President and CEO, NBT Bancorp: Yes. I’ll start and let Annette chime in with some of the details. But so not unexpectedly, we ended up with more liquidity post the Evans transaction because we had opted to liquidate their portfolio. Remember, we talked about this six months ago or for the last six months, we said we were lagging in somewhere between 25,000,000 and $30,000,000 of investment purchases. So we were at a point that more than covered collateral requirements that Evans had for their municipal funding base.

So that was on purpose. Why did we end the quarter with a little bit more liquidity? In fairness, loan growth was fairly modest for the second quarter, so we ended up a little bit more. Deposit growth in the second quarter that normally for us is actually negatively impacted by municipal flows was very positive. And I think that’s a holistic effort by our people across all lines of business to say, let’s secure the additional funding because that’s where the core value of the franchise is.

So Matt, when we think about that just in terms of that from a funding standpoint, we did clearly have some known redemption outcomes because we did liquidate or redeem the trust preferred I’m sorry, the sub debt securities that we initiated five years ago during the pandemic. And so we did keep ourselves in a position to be able to be that liquid. That said, balance sheet still has ample liquidity to support all of our growth attributes. And probably also almost importantly here in the near term is holding company liquidity is still very strong, above one times our annual requirements. So really like where we’re positioned.

Annette Burns, Chief Financial Officer, NBT Bancorp: And I would just add, as we think about the quarter, the following quarter, Scott mentioned the sub debt repayment, but we also expect to have some muni outflows. And then the remaining liquidity is probably going to support some loan growth.

Steve Moss, Analyst, Raymond James: Securities assets sit at just over 16%. The last couple years has been more like 17 to 18.5. Do we get back there or is this kind of a new good level for securities assets?

Scott Kingsley, President and CEO, NBT Bancorp: Great question. I think we’re reinvesting cash flows that are coming off the portfolio. And if an opportunity presents itself for a slightly above average yield, I think we’re capable of analyzing that opportunity.

Matthew Breese, Analyst, Stephens Inc: Got it.

Joe Stagliano, President of NBT Bank, NBT Bancorp: Okay.

Steve Moss, Analyst, Raymond James: Scott, maybe just updates on the CHIPS Act. It seems like we’re still on by year end and despite some bluster from the current administration about the CHIPS Act earlier this year, I think I read today that Mike Pond in fact got a bigger tax break. So I just wanted to hear the latest and greatest on that tax

Scott Kingsley, President and CEO, NBT Bancorp: Great update. Thank you for asking. So to your point, you’re right that not only did Micron recommit to the expansion in Central New York, but they have a secondary program that I think they’re already underway with for a second ship fab in Boise, Idaho. And my impression is that’s underway. Probably a lot easier to get started with something that’s an add to an existing facility than something that’s coming from the ground up.

So probably not a surprise that that’s where they went with that outcome. To your question on additional tax breaks, that’s our understanding as well that the approval of the BBB gave them some additional opportunities from an investment tax credit standpoint. How large that is, not 100% sure because I’m not the expert on the Tax Act. But that being said, it looks like it’s a net positive for them. If you remember, Matt, and you’ve been engaged with this before, they’ve been very specific about this that without the tax incentives and without the governmental support that they were receiving, that landing in The United States with incremental production would have been more difficult for them.

Steve Moss, Analyst, Raymond James: Thank you, appreciate it. Last one is just, Scott, would love to get your take on M and A in this environment with the Evansville behind you. I think in the past, you’ve made the comment that we need to be 100% focused on integration and getting the culture right. I’m curious what your updated thoughts are there. That’s all I can Yeah,

Scott Kingsley, President and CEO, NBT Bancorp: you’re spot on. We are completely focused from an integration standpoint. The team in Western New York is doing a fabulous job out of the gates. We are getting the opportunity as senior leadership to customers, spend a lot of the time with their people. They’ve been very patient and willing to learn some of our systems and the protocol about getting things through our systems.

So really appreciate that effort by them. But in general, I would say we feel really good about where we are from a capital position post acquisition. We always talk to every transaction today with purchase accounting adjustments is going to have some dilution characteristics. But in the meantime, along the way to the closing, you’re still running your institution and hopefully you’re accreting capital every single day. Definitely the case with us.

We’re at a higher level of tangible equity ratio than we were when we announced the transaction. So to the extent that there was any concern about dilution and longer term dilution and payback, I think we’ve answered that question spot on. So feel really good about that. That said, I think that there are opportunities from an M and A standpoint. I think we continue to very methodically evaluate those.

If you think about the franchise we have right now from Buffalo to Portland and Wilkes Barre, Pennsylvania to Burlington, filling in opportunistically is probably our prime focus. And whether we do that organically with branch fill ins and teams that are serving the market or we find a like minded culture consistent, community bank to partner with, looking at both for sure.

Joe Stagliano, President of NBT Bank, NBT Bancorp: Thank you. Appreciate that. Thanks, Matt.

Conference Moderator, NBT Bancorp: Thank you. Our next question comes from the line of Manuel Neves from D. A. Davidson. Your question, please.

Matthew Breese, Analyst, Stephens Inc: Hey, just stepping back to the NIM for a moment. Do you have like a quarter end NIM spot rate? Hopefully that’s like a good proxy to the third quarter.

Annette Burns, Chief Financial Officer, NBT Bancorp: Emmanuel, I don’t have a spot rate for you, but I would say that June’s margin included the full impact of the accretion for the quarter. So we only had two months of the Evans accretion in the second quarter. We’ll have a full impact in the third quarter. That’s going to increase the margin in and of itself a couple of basis points from three fifty nine.

Matthew Breese, Analyst, Stephens Inc: I appreciate that. And just wanted to confirm one of the piece. Earlier you talked about there might be a few basis points improvement from asset yield repricing higher and just new yields. Was that few basis point NIM improvement or just loan yield improvement?

Annette Burns, Chief Financial Officer, NBT Bancorp: I would say overall NIM improvement.

Matthew Breese, Analyst, Stephens Inc: And with funding costs kind of stabilized?

Annette Burns, Chief Financial Officer, NBT Bancorp: Correct.

Matthew Breese, Analyst, Stephens Inc: Correct. I appreciate the reiteration of that guidance. I just wanted to clarify whether it’s asset yields or NIM. So that’s a good trajectory.

Scott Kingsley, President and CEO, NBT Bancorp: And Manuel, as we said before too, that this would also presume that at some point in time we get out of the current inversion that we have into that very important belly of the curve because that’s where we’re pricing most of our assets up. So there was pressure on that in the second quarter. If some of that pressure could relieve, I think our opportunities would be even better.

Matthew Breese, Analyst, Stephens Inc: Alright, Shifting over, the the the fee income ratio to revenues is is ticked lower because you you added a spread heavy bank. Does that increase your kind of, appetite on the fee side for either additions or lift outs or just is that something that you have extra focus on or is it just are you being opportunistic in general?

Scott Kingsley, President and CEO, NBT Bancorp: I’m gonna frame it this way is we love all three of those businesses. And so we are motivated to organically grow them or opportunistically add to our base via M and A. Remember that what we like about those businesses that generally over time if you can grow them organically yourself, they’re the gift that keeps on giving because they don’t take regulatory capital. If you decide to engage in an M and A transaction, yeah, for a short period of time you’re using some capital. But usually the return characteristics are so positive on those that we’re very interested in that.

That being said, to your point, acquiring Evans that had a different mix than us makes that a little bit more difficult. But I think again, finding a balance and continuing to focus on the fact that having a diversified revenue stream is a net positive will remain in our strategic focus forever.

Matthew Breese, Analyst, Stephens Inc: I appreciate the commentary. Thank you.

Scott Kingsley, President and CEO, NBT Bancorp: Thanks. Thank you.

Conference Moderator, NBT Bancorp: And our next question comes from the line of Eddie Strickland from Hov Group. Your question please.

Steve Moss, Analyst, Raymond James: Hey, good morning. I was just wondering if we could talk about the impact of the sub debt redemption in terms of interest cost differential there. I mean, I know you said there was other liquidity sources you used to repay that. Were those kind of similar 5.45% rate?

Annette Burns, Chief Financial Officer, NBT Bancorp: That’s correct. So $118,000,000 of sub debt was right around 5.45% on a weighted average basis. That was going to tick up to close to 9% as we turn to a variable rate. So we paid that debt off using our liquidity. And we have to borrow, which is somewhere in the 4.25, 4.4.

So, kind of the differential between the nine and the 4.4 is kind of what our savings would be on go forward basis.

Steve Moss, Analyst, Raymond James: Understood. And it sounds like you even had savings versus the pre reset rate as well.

Annette Burns, Chief Financial Officer, NBT Bancorp: A little bit using overnight. Yep.

Steve Moss, Analyst, Raymond James: And I just wanted to switch gears to credit. I mean, do you think charge offs can stay at this sort of lower level you had this quarter? Do we see them tick back up a little bit, given you still have some more runoff in consumer and solar?

Annette Burns, Chief Financial Officer, NBT Bancorp: It’s a great question. We think that the second quarter was a great quarter from a performance perspective on net charge offs. We don’t think that that’s going to recur. Our average net charge offs are probably more in the 3,000,000 to $5,000,000 range a quarter. So that’s probably more likely.

Steve Moss, Analyst, Raymond James: All right, great. Thanks for taking my questions.

Conference Moderator, NBT Bancorp: Thank This does conclude the question and answer session of today’s program. I’d like to hand the program back to Scott Kingsley for any further remarks.

Scott Kingsley, President and CEO, NBT Bancorp: Thank you. In closing, I want to thank everyone on the call for participating with us today and for your continued interest in NBT. We look forward to catching you up late October on our third quarter results and go Bills!

Conference Moderator, NBT Bancorp: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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